Newsprint prices inch up; industry braces for some tough decisions

Newsprint prices, which had dipped slightly last year, have started going up again and hovering around $600 per tonne. Various global factors like rising crude oil prices, the devastating earthquake in Chile and resultant increase in paper pulp rates, increasing global demand for newsprint and rise of newsprint prices in the US are making import of newsprint to India costlier. But, the print industry is not unduly concerned yet, given the strong performance of the rupee against the dollar.

However, the industry is sceptical whether the newsprint prices will hold in the next quarter.

The newsprint prices are currently hovering at around $575 to $600 per tonne, as compared to $460 per tonne in July 2009. Experts say that though the current situation is not that bad yet, however, once prices cross $1,000 per tonne, it will be an alarming situation for the industry. Let’s go through some of the key factors that are responsible for the current rise in newsprint prices.

Crude oil price & freight rates

Crude oil prices are increasing globally, which is impacting freight prices directly. Last year, when newsprint prices were falling, crude oil prices stood at around $40 per barrel, which have now doubled to around $80 per barrel. Hemant Datar, Deputy GM - Material Paper, Sakal Group, said, “Crude oil price impacts import cost of newsprint directly. As crude oil prices have doubled in the last one year, it has started impacting newsprint prices.”

On the other hand, with some parts of the world showing signs of recovery from the global financial slowdown, demand for newsprint is rising rapidly. Meanwhile, the shutdown of several paper mills in Canada, which is a big manufacturer of newsprint, and in Europe is also leading to hike in newsprint prices.

Chile, China & the US

The earthquake in Chile on February 27 caused massive damage to the country’s forest products industry, which has resulted in the increase in paper pulp prices. Chile produces 8 per cent of the world’s paper pulp and the large scale damage to its mills has impacted global prices. North America gets paper pulp from Chile in large quantities, and the increase in paper pulp prices has forced US newsprint mills to hike rates. Jwalant Swaroop, Director - Advertising and Business Development, Lokmat Group, said, “The Chile earthquake has impacted pulp prices globally. Recycled pulp is getting costlier and is a big cause for worry.”

Swaroop further said, “The Indian industry is still at a nascent stage as far as publishing is concerned, and we have no option but to buy expensive newsprint and cut down on our other expenses.”

On a similar note, Datar of Sakal Group said, “Print media is not doing very well in the US and recovery of used paper is also very low. ONP (old newspaper) is not being recovered, hence recycled pulp prices have gone up from $160 per tonne to $230 per tonne now.”

Apart from this, internal demand for newsprint in China has gone up in the last few months. “During 2006-07, China was a big supplier of newsprint, but it has withdrawn from the market since last year and now very less newsprint is being exported by China, which has closed the option for the Indian market,” Datar explained.

Only hope – the rupee getting stronger

Amid this gloom, the only factor providing some succour is the strong performance of the rupee against the dollar in the last few months. At present, the rupee stands at around Rs 44.5 to Rs 45 per dollar, which is a positive trend for the industry.

According to Mitrajit Bhattacharya, President & Publisher, Chitralekha Group, “One thing that has favoured the publishers in the last one year has been the easing of dollar rate. It had gone up over Rs 50 by the end of 2008, but now, as it has strengthened itself, it is a positive sign for us.”

India consumes 25-30 lakh tonne newsprint annually, of which 60 per cent is met by imports. Rama Newsprints and Papers Ltd, a private sector newsprint manufacturing company, claims to meet 22 per cent of India’s newsprint production capacity. Sudhir Jain, DGM - Sales Marketing, Rama Newsprints, believes that after the financial slowdown, this is a better time for the industry. “Every year, we see 10 per cent increase in demand for newsprint and this year so far has been nothing different,” Jain said.

Though, the Indian print industry does not seem much concerned yet, it is very sceptical about the prices holding in the next quarter. As Chitralekha Group’s Bhattacharya cautioned, “In most of the cases, newsprint prices account for more than 50 per cent of the cost for large publications, and if the rates cross $1,000 per tonne, there will be pressures on cover prices and page cuts once again.”